Introduction:
2023 was a groundbreaking year for Indian investors in several ways. With global investments flowing into the Indian economy, stock market indices repeatedly breached their all-time highs. Captivated by such strong performances in the equity markets, even the most conservative investors started drifting from traditional investment avenues, such as fixed deposits, towards the riskier yet rewarding equity markets.
As we move into 2024, investors are spoilt for choices for long-term investment options. India, with its rapidly growing economy, offers a plethora of investment avenues for those seeking to build wealth over time. This blog explores the five best investment instruments you can consider adding to your portfolio to achieve long-term financial success. Keep reading.
1. The Indian equity markets
The Indian equity markets have been a hotbed of activity in recent times. With both Nifty and Sensex consistently breaching their all-time high marks, they have attracted millions of new investors from India and abroad. Investors have also applied for Initial Public Offerings (IPOs) whole-heartedly, with many of them offering more than 50% returns in 2023.
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Moving ahead, the carnival is expected to continue for investors. You can start investing as per your investment goals and horizons. For example, if you are looking to build a long-term corpus, you can select specific blue-chip stocks and invest worry-free. On the other hand, if you want a regular stream of income, you can indulge in intra-day or swing trading after a thorough market analysis.
Having said that, you must remember that investing in the equity markets is a risky venture. It’s advisable to enter the fray only after gaining adequate market knowledge.
2. Mutual funds
Of late, mutual funds have emerged as one of the most preferable investment instruments among all types of investors. Asset Management Companies (AMCs) create a pool of funds by collecting investments from several investors with common investment objectives. And then, these funds are invested in equities, bonds, and other money-market instruments to generate returns.
Mutual funds are less risky than direct equities as professional fund managers manage them. Another advantage of investing in mutual funds is choosing between equity, debt, and hybrid funds as per your risk appetite and investment goals. You can make lump sum investments in the desired mutual fund scheme or start a Systematic Investment Plan (SIP) to build a long-term corpus.
3. Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a government-backed savings scheme that offers the dual benefits of capital safety and attractive returns. PPF has a fixed lock-in period of 15 years, making it an ideal choice for long-term investors. The interest earned and the maturity amount are tax-free, making PPF a popular choice among conservative investors looking to maximise their returns.
You can start investing in the PPF scheme by opening a PPF account with an authorised bank or a post office. The minimum and maximum amount you can invest in a year is Rs. 500 and Rs. 1.5 lakh respectively. The government revises the PPF interest rate every year. For the financial year 2023-24, it stands at 7.1% per annum.
4. National Pension System (NPS)
The National Pension System (NPS) is a voluntary, government-backed savings scheme designed to help you make systematic savings for your retirement. It allows you to invest in a mix of equity, fixed-income generating avenues, corporate bonds, government bonds, and liquid funds, thereby, diversifying your investment portfolio.
Investments made towards NPS are eligible for tax benefits under section 80C of the Income Tax Act. Furthermore, you can avail of an additional tax deduction under section 80 CCD(1B), making NPS one of the most crucial instruments for those looking to save for retirement.
5. Exchange Traded Funds (ETFs)
Exchange Traded Funds or ETFs have emerged as another popular investment avenue. They allow you to invest in a diversified portfolio of securities covering multiple asset classes. However, unlike mutual funds, ETFs are traded on the stock exchanges like stocks. They offer higher flexibility and allow you to invest as per your long-term financial goals.
To conclude
Building a well-rounded and diversified investment portfolio is the key to achieving long-term financial success. You can invest in a mix of asset classes to create a portfolio that aligns with your financial goals, risk tolerance, and investment horizon. Successful long-term investing requires patience, discipline, and a well-informed approach.
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